Yesterday at my presentation, someone asked about CFC and recursion. I had mentioned that normally I shy away from it, and I had been told specifically by MACR engineers that it was a bad idea inside UDFs, especially if the recursion got more than 50 levels deep. I made it clear though that I wasn't 100% sure this applied to CFCs.
Todd Rafferty had to deal with exactly this issue and has two blog entries as well as a code sample. You can check out these entries here: